Speakers: Sam Parr (host), Shaan Puri (host)
The Most Overlooked Path to Wealth [00:00:00]
Shaan Puri: Franchising is one of the most overlooked paths to wealth in America.
Sam Parr: That’s a very bold statement.
Shaan Puri: They said the most overlooked.
Guest: There are more millionaires generated from franchising than all combined players ever in the NFL. And there’s a number of private equity family offices starting to get further and further into franchising. And they’re buying both large franchises or they’re doing roll-ups.
Sam Parr: You made this bold claim and I wanted to fight you about it. Now I’m totally on your team. Traditionally, franchising is looked at as either McDonald’s and Subway, and you got to have $3 million to do it. So, only the wealthy can actually do it. But there’s 4,000 franchise brands, and if you’re willing to do the research, willing to do the work, there are a lot of hidden gems of brands and industries that are really taking off.
Shaan Puri: So, explain the path. What’s the game plan?
Guest: This is such a good hidden gem. I don’t want to talk about how I did this.
From College Laundry to Multi-Million Dollar Exit [00:02:15]
Sam Parr: All right. What’s up? Welcome, Alex. Alex is the franchise guy that we have invited on the pod. I don’t know if that’s what you normally get called, but that’s what we’re calling you. This podcast called My First Million, one of the reasons we originally called it that was because there were all these different ways people made a million dollars. In my first 10 episodes, I think I had a guy who did it in real estate, a guy who did it with Amazon FBA, a guy who did it playing poker, and I was very fascinated just to hear all the different ways you can win in business for two reasons.
One, I wanted a menu of options I could go choose from. How can you know which one sounds most appealing to me? Which one sounds like it fits me? And the second is I like just hearing that you could do it in all these different ways because it makes the impossible feel extremely possible. I remember when I was pre-success, it felt like winning was just this needle in a haystack. I couldn’t find it. And then as I’ve been doing this podcast, I realized it’s a haystack full of needles. There are so many to choose from. There are so many different ways to win. You’re going to talk about retail and franchising. Did I do you justice there setting that up?
Guest: Yeah, absolutely. I honestly up until four or five years ago was a bit of a franchise hater and thought, “Is that really entrepreneurship or are there viable paths there?” And the more I’ve gotten into it, the more I’ve realized it’s probably the most overlooked path to wealth creation in America.
Sam Parr: That’s a very bold statement. Most overlooked.
Guest: Yes.
Sam Parr: Well, let’s start with who you are. So you’re a guy who made your initial wealth in the laundry business. Can you give us the fast-forwarded quick version of your story?
Guest: Yeah, I’ll try to be short. I’m originally from small-town Minnesota, a town of 15,000 people. I ended up in North Carolina for college. Went to Wake Forest, studied finance, was about to have a pretty boring, plain life, and then bought a laundry business my freshman year of college. I did seller financing. Had to learn what that was at 18. I learned what a discounted cash flow analysis was at 18 just talking to business school professors before I got into the B-school. I ended up buying that business and learned more doing that than any class I took at Wake. We ran it, we grew it, we sold it for a little over 10 times what we bought it for and had an exit our senior year. That set the path to complete addiction.
Sam Parr: Why did you buy a laundry business as a college freshman? Who does that?
Guest: I was working for them. I was working for them as a way to make a little extra beer money and was hooked. I was like, “This could work at Duke and Chapel Hill and Vanderbilt and you guys are graduating. I want to buy it.” And they asked for 30 grand and my jaw hit the floor. I was like, “That’s the most money I’ve ever heard of.” I had maybe two grand saved up. So, I had to get creative and figure out how we were going to buy this and structure it.
Sam Parr: Well, that’s one of the three businesses college kids start. It’s usually some type of app where college kids could sell stuff to other kids, or a roommate matching app, which I did, or a laundry business. I know Blake Mycoskie, the guy who started Tom’s Shoes, his first business was the laundry business. What were you doing? You just go pick up the laundry from students’ dorm rooms? I remember when I went to college, I didn’t know how to do laundry. I’d grown up and my parents did my laundry, so by the time I got to school, I was a little confused. My roommate had to teach me what is a dryer sheet and why do you use this.
Guest: Yeah. Tuesday was pickup day. You’d leave your stuff outside your dorm room door. We’d have runners, mostly football players that could hold like 200 pounds of laundry at a time. They would just run up and down the hallways, grab your bag. We’d partner with vendors off campus. They would clean it. We’d return it Thursday. But the big unlock for us was kids aren’t paying for this. It’s a bunch of broke college kids. It’s their affluent parents or parents that are worried about them being at college not knowing how to do laundry.
The big thing that changed it for us that allowed us to go from 30-ish thousand in revenue when we first bought it to just under 300 grand a school year in revenue was getting a booth at orientation week. For whatever reason, Wake gave us a booth next to where you got your meal plan, where you got your parking pass, where you got your keys to your dorm—all the marquee things you need to do. And we went full ShamWow guy. I was like, “Step right up. We’re the premier laundry service at Wake. Your kids have to have it. You don’t want them to go clothesless. You’ve got to sign up for this.”
Sam Parr: Yeah. And they loved it. They thought it was the cutest thing. And they’re like, “Yeah, that’s true. My kid is screwed going here and not knowing how to do laundry. I want them studying or having fun.” So we went from 30k a year to like 280,000 our first year.
Shaan Puri: Is this still a business that any college kid could do today? Has this been a solved problem or does every campus just have a version of you who hustles and makes the freshman laundry service?
Guest: I think Sam’s right. The number of people I’ve met that have gone on to be serial entrepreneurs that were like, “Oh, I did that in college, too.” I thought I was so cool and special and unique then I meet 30 other college kids that had a laundry business at their school. So I don’t think it’s been systemically or at a scale solved. The business that we had was called Wakewash and it’s been owned by nine other groups of college kids. It’s changed hands that many times and it’s been such a cool launchpad for all these other entrepreneurs because it’s this safe, fairly simple business model. But you do learn so much: how to hire people, manage them, fire people, work with universities on your contracts and agreements, market to customers, sell to people. Again, it changed my life entirely. I don’t think I’d be an entrepreneur at the level that I am if it wasn’t for that college laundry experience.
Sam Parr: How old are you now?
Guest: Just turned 34.
Sam Parr: And you sold that for what? You said mid-six figures.
Guest: It was a little over 400,000.
Sam Parr: Oh, that’s badass. So in college you sold a business for $400,000.
Guest: I thought I could retire.
Sam Parr: As a 21-year-old, you’re like, “Oh my god, I don’t have any college debt.”
Shaan Puri: You didn’t pay attention to finance class. So, good thing you didn’t go down the finance career path.
Guest: Well, the funniest thing is like any good laundry man, he ran another cycle. He goes and he starts another laundry business right afterwards. I sold out for a little bit. I went and worked for Ernst & Young. I thought as far as corporate jobs go, consulting has got to be entrepreneurial. You’re jumping from project to project, you’re working with different teams. I loved the people I worked with and did learn a lot, but it was soul-crushing work. I hated the type of work I was doing.
In 2014 and 2015 is when all the “Uber for X” businesses were taking off. Instacart and Shipt and Wag and Rover and Drizly and DoorDash. I thought someone’s going to do this for laundry and dry cleaning and if it’s not me I’m going to hate myself. I need to go at least throw my hat in the ring. So, I quit my job at EY and started a company called 2U Laundry in January of 2016. We had a pretty wild roller coaster of a ride from there. The story is still being written to a degree there.
The Business Model of Franchising [00:07:45]
Sam Parr: You made this bold claim. You said that franchising is one of the most overlooked paths to wealth in America. I want you to be right, but we’re going to have a conversation about that. The reason you know this is you have a software company where it’s a marketplace for franchises. So, you have perhaps one of the best bird’s-eye views of the industry. What are the numbers that would make you make that claim?
Guest: Franchising is a business model. First of all, I think a lot of people think franchising is an industry. It’s a business model that spans food to hospitality, health and wellness, early childhood development. Most of us probably don’t even realize we’re using franchises on a daily or weekly basis. Hotels like Marriott and Hilton are franchise businesses. There’s all the food that we all know: McDonald’s, Subway, Chick-fil-A. But then gyms that we all go to—OrangeTheory, F45, Barry’s—they’re some form or fashion of a franchise. And then you talk about your home: gutter cleaning, painting, pest control. All franchise.
It is 8% of our country’s GDP produced from franchise business models. I think traditionally franchising gets looked at as either McDonald’s and Subway where you have to have $3 million to do it, so only the wealthy can actually do it well, or it’s these slimy ones that are just popping up and they don’t have systems and they’re telling you they’re going to sell you a dream. But there are 4,000 franchise brands. If